Remortgage from Fixed rate

careym

Hi all,

Looking for a bit of help to validate my way of thinking with regards to moving away from one fixed rate mortgage to another.

Currently with Abbey on a 10 yr fixed @ 4.99 per year, monthly charge of 800. Amount owed is 126k over 21 1/2 more years. Early exit fee is 7603.

I can move to FD mortgage which is fixed @ 2.69 for 5 years with set up fee 1999 and amount borrowed would be 133603 inc exit fee for 21 years term. I would add fee to mortgage making amount borrowed 135,600

2nd option is abbey with rate of 2.99 for 5 years with fee of 999 amount borrowed would be 133603 inc exit fee for 21 years term. I would add fee to mortgage making amount borrowed 134,600

Both options would reduce my monthly payment to around 700 from 800 and over the life if I used a figure of 3.69% after fixed terms ends I would pay back 188k compared to 191k if i stayed on current deal. I used a figure of 3.69% for comparison after fixed rate ends to ensure comparison was consistent, but I could use a different figure which I know will affect over all cost paid back I wanted to draw a line. I would re mortgage again when fixed ends.

My question to the more more knowledgeable than me is whether these figures make sense (I have used MS mortgage comparison tool) and just to confirm this looks a good opportunity to reduce my monthly outgoings or use the extra money to overpay.

Thanks in advance and I hope I have gone into enough detail.

careym

Forgot to add that we estimate current value of house @ 210k based on other houses in street so LTV is about 63%

EMac_2

How far into the 10 year fixed rate are you? Did you pay a fee for this rate?
It sounds like you are proposing to extend your mortgage by £10,000 to save £100pm over the next 5 years, £6k. Are you sure you want to do this?
We have no way of knowing what rates will be like in 5 years time so you may yet see the benefits of the 10 year rate depending how long you have to go.

careym

EMac wrote: »

How far into the 10 year fixed rate are you? Did you pay a fee for this rate?
It sounds like you are proposing to extend your mortgage by £10,000 to save £100pm over the next 5 years, £6k. Are you sure you want to do this?
We have no way of knowing what rates will be like in 5 years time so you may yet see the benefits of the 10 year rate depending how long you have to go.

Hi Emac, thanks for you reply.

I am 4 years into a fixed rate mortgage. Yes essentially i am extending by 10k to save a guaranteed 6k over 5 years with the aim of overpaying. Looking a the debt level in 5 years of current v new with the current without overpaying my mortgage would be 106k while if i change 109k but would have overpayed 5k-6k. The issue wold be that if in 5 years the interest rate is higher than it is now but I would have that problem in 6 years with my current fixed rate.

Hope the below works of current v new comp not inc interest

0 £126,000 0 £135,603
1 £122,514 1 £130,732
2 £118,850 2 £125,728
3 £114,999 3 £120,588
4 £110,951 4 £115,308
5 £106,697 5 £109,885
6 £102,226 6 £107,479

dimbo61

A number of lenders IE Nationwide will not allow you to leave a current fixed rate deal and then offer you another cheaper deal ! Not sure about Abbey.
Even going for the FD deal and overpaying by the £100 a month so your mortgage would be £800 a month.
You would be £2000 better off over the 5 years BUT if you overpay the existing mortgage every month by whatever you can afford ( DO abbey allow 10% overpayments?) I think this would save you more.
Do not forget you are borrowing an extra £10,000 which you have to pay interest on

careym

dimbo61 wrote: »

A number of lenders IE Nationwide will not allow you to leave a current fixed rate deal and then offer you another cheaper deal ! Not sure about Abbey.
Even going for the FD deal and overpaying by the £100 a month so your mortgage would be £800 a month.
You would be £2000 better off over the 5 years BUT if you overpay the existing mortgage every month by whatever you can afford ( DO abbey allow 10% overpayments?) I think this would save you more.
Do not forget you are borrowing an extra £10,000 which you have to pay interest on

Thanks for the reply,

Interesting comment re not being allowed to change to a lower rate if possibly staying with santander. Something I will look into.

At the moment i am not in a position to overpay so the extra £100 would help reduce the mortgage. I see what you mean about interest but is it better to pay 4.99% on 126k or 2.69 on 138k with overpayment?

Yes Abbey do allow over payments upto 10%

getmore4less

you got the start point right adding the ERC and fees.

Then make the payment the same for all options.
(this is important to do a like for like)

Then check the amount owing month by month.

This is the easiest way to compare.

As the current fix runs out in 6 years thats the max payback period to look at.
there is a bit of an unknown in 5 years forthe last year but unless the new numbers are quite a bit better than the current deal you might as well stay where you are.

careym

Thanks,

Is there a formula to look at the interest rates? I have used the fixed rate comparison tool on the main site to look at rates, amount owed at each year and total payback if assuming when fixed rate ends in 5 years it is x and then use the same figure for current deal ending in 6 years.

getmore4less

Forget the MSE calculator you can't be sure what it is doing

just use a simple one

http://www.whatsthecost.com/mortgage.aspx

using your numbers(set to interest only)
current deal £126k @ 4.99% paying £800pm
amount owing after
3 £115,303.74
4 £111,368.19
5 £107,231.71
6 £102,884.03

FD £135600 @ 2.69% paying £800pm
3 £117,024.27
4 £110,492.08
5 £103,781.99
6 £96,889.15

payback during year 4 ahead £4.5k when the 5y fix ends.

to break even(£102884) by year 6 the rate after the FD fix ends would have to be 8.4% anything under that and you stay ahead.

If rates are that high in 5 years time that will be the least of our worries.

careym

Thanks for the info. I will check the link and play around with the figures.